In 17th century Europe, wealth was in gold and silver coins. As ones wealth increased, this became a load to carry around, so, the jewelers being the ones with the strongest safes, wealthy people began leaving their coinage with them for a small fee. The jeweler would in turn give them a receipt for their money. These receipts soon became useful as a form of money in large transactions. In other words, the jewelers were printing the worlds first paper money.

Over time, the jewelers noticed that only about 10% of the coins stored with them were ever actually taken back. That is, at any given time they always had $9 on deposit for every $1 taken back out and it occurred to them to start making loans based on the average amount of money which remained. They started loaning out other peoples money without consent, only they didn’t just loan the coins, they also wrote receipts of credit that represented the coins.

If you have $10,000 that doesn’t belong to you and you loan out $9000 of it , and you still have a large portion of that in coins, you now have people indebted to YOU for $9000, plus interest. You have printed $1000′s in paper money and created $9000 of indebtedness to you without owning anything more than the safe the money is kept in.

Since the interest rate back then was 20%, in one year you will have collected $1,800 in interest on other peoples money. If everyone pays you back all that you loaned at the end of the year, then you also have back all the paper money you issued, often in the form of paper issued by other jewelers.

Then the jeweler-bankers took the next logical step, which was to loan out 10 times more money than they actually had, in the form of paper receipts redeemable for other paper receipts but backed 10% by coinage. In other words, they created wealth out of thin air simply by printing it. In this way the jewelers created massive wealth for themselves almost overnight.

This is called Fractional Banking and is still how banking is done today. Making loans covered by only a fraction in actual assets, that the bank doesn’t own anyway, of the amounts loaned.

Sometimes, economic crises occurred, a war or famine, and people would rush to the bank to withdraw their money. This is what caused banks to go bankrupt, because they never had as much money as had been placed with them. This resulted in the creation of account insurance by the Federal Reserve. Accounts are now automatically insured, so if the bank collapses, the Fed will print up enough paper to pay off the accounts. Why not? All it costs them is the paper.

The Federal Reserve is not Federal. It’s a group of nine of the worlds largest banks. They print all our money. Look on any bill at the top. It says “Federal Reserve Note”. Our government mints coins only. These banks print our money and sell it to us, pretty much at cost, plus face value. So if the Fed prints up an extra 200 billion dollars, they have just made themselves 200 billion dollars at no cost to them. The owners of these banks are creating vast wealth for themselves by printing money.

Last year they inflated our money supply by about 11% because Bush needed money to finance the war in Iraq. He borrowed from China, Mexico and Saudi Arabia, and has to pay it back. Who knows how much they’ll increase inflation by, this year? Depends on how much more money we need out of thin air to pay back more debt. Our national debt is over 9.4 trillion dollars now and is climbing at the rate of over 1 trillion per year.

Is your mind blown yet? Did you know that our money is literally based on nothing? It’s a credit system and the banks hold all the credit cards. They create wealth out of nothing. When you go to the bank for a mortgage loan, say for $100,000, the banker makes an entry in a ledger that says you now have $100,000. That’s it. The banker has created $100,000 out of thin air. All the other banks accept this, so you get your house, the seller gets the money either as another ledger notation or as pieces of printed paper, and so on down the line until it all trickles away.

As you pay back the banker, his wealth increases for having used a pen.

We have long been off the gold standard that used to back up our money. There was a time when we had a dollars worth of gold for every dollar in paper. No longer. Now it’s all based on credit. Even Silver Certificates that used to say “redeemable in silver” all disappeared at the same time our silver money was sucked up by the banks in 1964. Now we get greasy-feeling clad coins that aren’t worth a 20th of what the silver ones are, and the banks made another killing off the silver.

The Fed, that private group of banks, is steadily creating more and more money. Their greed is expanding, which is expanding inflation. When there’s $2 where there used to be just one, then each dollar buys half what it did before. That’s simple economics. It’s the same as if you have 10 apples but only 5 people want an apple. The price of apples drops a lot.

This means that permanent assets like real estate and precious metals are going to continue to rise in price to keep up with inflation. These constitute real wealth and will also rise in value with population increases. Commodities, stuff we use every day like oil, will also of course rise in price, but being consumables, take away from our wealth. In the meantime, wages don’t rise as fast as inflation. Wages always lag way behind.

This means that the faster inflation increases, the harder it is to make a decent living, and the more poverty spreads among the population. Inflation is exactly the same as taking a weekly pay cut, every week.

There’s many conspiracy theories out there but as usual, the theories are always outdone by the facts. This isn’t a banking conspiracy created by secret money moguls, this is simply the actual monetary system that has developed. These people do conspire, constantly, to manipulate governments in ways that will constantly increase their wealth, and they do buy up massive influence in national governments. What keeps reducing their fortunes, mostly, is wars. Wars destroy everything and that includes the accumulated wealth of these non-producing leeches.

The way out of this trap is to nationalize the monetary system. Start printing our own money and giving the sole authority to do this to our government only, with strict limitations on the quantity and a strict setting of the value based on precious metals such as gold. The amount of gold available has been almost constant now for about 2000 years. The money cannot be redeemable in gold or all our gold would quickly leave the vaults. The money simply has to be pegged to gold by law and only a certain amount allowed to be in circulation.

We are only allowed to take a small amount of cash out of the country now. This should be further limited to countries with which we have a trade balance or surplus, so that the cash flow is at least equal both ways. None of our money should go to any country in which trade swings to the deficit side. Trade should then cease.

We should repudiate all national and foreign bank debts just as many countries have done with us, and refuse to do business with any nation that will not do equal business with us. We should no longer borrow money from any foreign nation for any purpose. These may seem extreme measures but remember that the debts we owe were created out of thin air to begin with, and there is no actual loss. Like a pyramid scheme, and all such schemes must eventually collapse.

I expect to see blue pigs flying around before any of this happens, of course. But in the meantime, do everything you can to prepare yourself as food, fuel and all commodity prices are going to increase, and faster than you may think, even though your wages will not.

Kudos to Jordon for bringing documentation on this to my attention.
It’s always nice to be noticed. Midnight Sun has a corresponding article including excerpts from this one.

Tags: banking, banks, Fed, Federal Reserve, inflation

This entry was posted on Sunday, April 6th, 2008 at 4:15 pm and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.